China impact on real estate ‘overblown’

A leading researcher has downplayed the impact of Chinese demand on Australian property following recent speculation that tighter controls from Beijing could rattle local real estate markets.

Professor James Laurenceson of the Australian China Relations Institute spoke to Mortgage Business in response to recent reports in the mainstream media that speculated Chinese nationals will find it increasingly difficult to get money out of the country.

“If there’s a pullback in Chinese investment over the next couple of quarters – I don’t think that’s going to have a dramatic impact.”

Mr Laurenceson explained that Chinese investment has little impact on the Australian real estate market overall, only impacting “very small pockets” of real estate in Australia.

“There have been other bigger factors like record-low interest rates which have been encouraging Australian investors to put their money in property. I think those sorts of fundamental factors are going to continue to drive the real estate market, not Chinese investment,” he added.

Mr Laurenceson clarified what’s actually been happening in Beijing, explaining that the constraint on Chinese nationals getting their money out of the country will be short term and that in fact Beijing is merely “enforcing existing rules”.

“In the past, the official rule has been that Chinese individuals can’t ship more than US$50,000 in a given year, but they haven’t really enforced that. Now they’re just enforcing it,” he said, adding that currently China has surprisingly little overseas investment compared with countries like the United States.

He added that while there might be a slowdown in terms of Chinese investment in Australia over the next quarter or two, the general trend is that China’s investment overseas will increase in the coming years.